Quarter over quarter (QoQ)

Definition

Quarter over quarter (QoQ) is a financial metric used to analyse changes in a company’s performance or a particular variable over successive quarters, typically within a fiscal year.

What is quarter over quarter?

Quarter over quarter provides insights into the growth or decline within a relatively short timeframe. In QoQ analysis, data from one quarter is compared to the data from the previous quarter. This comparison helps stakeholders to assess the changes in key business indicators, including revenue, earnings, expenses and other operational metrics.

The formula to calculate QoQ change is:

QoQ % change = ( (Current quarter – Previous quarter) / Previous quarter) x 100

A positive QoQ percentage indicates growth or improvement, while a negative percentage indicates decline. Analysing QoQ trends helps stakeholders understand the pace of change in a company’s performance, identify seasonal patterns, assess the effectiveness of strategic initiatives, and make informed decisions regarding investments, resource allocation, and business planning.

It’s important to note that while QoQ analysis provides valuable insights into short-term trends, it should be complemented with other financial and operational metrics for a comprehensive understanding of a company’s overall performance and prospects. 

Example of quarter over quarter

Let’s say a company measures its revenue growth on a quarterly basis. In quarter 1 (Q1) of the year, the company earns $1 million in revenue. In quarter 2 (Q2), the company’s revenue increases to $1.2 million.

Now we can calculate the change in revenue from Q1 to Q2:

QoQ revenue growth = ( ($1.2 million – $1 million) / $1 million) x 100  = 20

So, the company’s revenue grew by 20% quarter over quarter.